HSN deal shorts shareholders, analyst says
NEW YORK — Barry Diller’s HSN Inc.’s proposed $209 million acquisition of billionaire Paul Allen’s controlling stake in Ticketmaster Group, confirmed Tuesday, drew immediate fire from major entertainment money manager Mario Gabelli.
“This deal stinks,” Gabelli proclaimed on a conference call held by Diller with press and Wall Streeters. While the money manager said the deal is “wonderful” for HSN, he complained Ticketmaster’s board had abdicated its responsibility to its shareholders by selling control of the company without a control premium being paid to all shareholders.
Allen is getting $17 a share for his 47.5% of Ticketmaster, compared with the stock’s price of $11.87, until word of the deal began spreading around Wall Street late last week. Regardless of Gabelli’s complaints, however, the rest of Wall Street liked the deal and lifted Ticketmaster stock $1.75 to $14.50 Tuesday, while HSN jumped $3 to $30.
HSN chairman Barry Diller denied that Ticketmaster shareholders were “being denuded here,” while Allen’s rep Bill Savoy defended “my right as a shareholder to enter into a transaction in my own best interest.”
Allen is being paid in HSN stock, and will emerge with 11% of the company. Savoy said the deal was a “very attractive financial transaction for us” and also gave Allen the “opportunity to participate in both of these companies as they move forward.”
The two companies overlap in what Diller describes as “transaction processing,” through HSN’s Home Shopping Network subsidiary and Ticketmaster’s business of selling tickets to live entertainment.
Diller was vague on the details, but said the two companies could work together in ways that would accelerate their growth. Ticketmaster CEO Fred Rosen said the company recently sold $1.8 million worth of tickets to a music concert on VH1, adding that together the two companies could exploit “people’s desire for entertainment-related merchandise.”
Rosen and Diller both hinted that the two companies could better utilize their combined resources. Ticketmaster’s phone lines are “dormant about 12 hours a day and our processing capacity is far from being used to full,” Rosen said.
“Ticketmaster can bring HSN cross promotion into an entirely new demographic,” said UBS Securities analyst Ed Hatch, noting that Home Shopping Network’s audience is primarily older women, whereas Ticketmaster reaches young men and women.
Under Diller, HSN has begun growing strongly again, recently reporting a 76% increase in earnings before interest, taxes, depreciation and amortization in the first quarter of 1997 to $44.4 million.